Macroeconomic implications of population ageing and selected policy responses

Abstract

Between now and 2030, every country will experience population ageing-a trend that is both pronounced and historically unprecedented. Over the past six decades, countries of the world had experienced only a slight increase in the share of people aged 60 years and older, from 8% to 10%. But in the next four decades, this group is expected to rise to 22% of the total population-a jump from 800 million to 2 billion people. Evidence suggests that cohorts entering older age now are healthier than previous ones. However, progress has been very uneven, as indicated by the wide gaps in population health (measured by life expectancy) between the worst (Sierra Leone) and best (Japan) performing countries, now standing at a difference of 36 years for life expectancy at birth and 15 years for life expectancy at age 60 years. Population ageing poses challenges for countries' economies, and the health of older populations is of concern. Older people have greater health and long-term care needs than younger people, leading to increased expenditure. They are also less likely to work if they are unhealthy, and could impose an economic burden on families and society. Like everyone else, older people need both physical and economic security, but the burden of providing these securities will be falling on a smaller portion of the population. Pension systems will be stressed and will need reassessment along with retirement policies. Health systems, which have not in the past been oriented toward the myriad health problems and long-term care needs of older people and have not sufficiently emphasised disease prevention, can respond in different ways to the new demographic reality and the associated changes in population health. Along with behavioural adaptations by individuals and businesses, the nature of such policy responses will establish whether population ageing will lead to major macroeconomic difficulties.

Figure 1. Employment by age

Age-specific workforce participation M=male. F=female. Combined figures for all countries in 2012.

Figure 2. Age-specific consumption as a share of income, by age and country

Income includes labour income, asset income, and net public transfers.

Figure 3. Savings by age in developed and developing countries

Gross domestic savings versus the share of the population aged at least 65 years, grouped by high, middle, and low-income countries. Blue=regression line for low-income and middle-income countries. Red=regression line for high-income countries. Black=regression line for all countries combined. GDP=gross domestic product. Gross domestic savings are calculated as the GDP for each country minus the final consumption expenditure (total consumption). Data exclude countries with a population of less than 1 million, or oil rents of more than 2·5% of the GDP (average for 2007–11).

Figure 4. Health expenditure outlays by age

Total health expenditure as a share of gross domestic product versus the percentage of the population aged at least 65 years. GDP=gross domestic product.

Figure 5. Financial status of households with and without older people

Financial effects of having an older person as a member of a household, by household type and country. HH=household. Impoverished expenditures: a non-poor household is judged to be impoverished by health payments if it becomes poor after paying for health care. Catastrophic expenditures: out-of-pocket health payments of at least 40% of non-subsistence spending. Impoverishment figures are not indexed to country-specific poverty line calculations.